December 12, 2013

Small Businesses Do The Math, Drop Their Health Plans

The NY Times reports on one of the many obvious yet "unexpected" consequences of ObamaCare - small employers are realizing that it makes no sense to offer employee health coverage:

Dropping Health Plans, to Pick Better Coverage

By STACY COWLEY

For nearly 20 years, Keith Perkins offered health insurance to employees of his small electrical contracting company in Greencastle, Pa., and footed most of the bill. This year, with the arrival of the Affordable Care Act’s insurance marketplace, he decided to stop.

Mr. Perkins, who is 54, did the math and calculated that most of his employees, who are spread across Maryland, West Virginia and Pennsylvania, would come out ahead if he dropped his group policy and let them buy insurance individually through the new federal and state exchanges.

He knew the move would be unpopular with some employees, but he was tired of trying to choose one plan every year to cover all of their diverse needs.

“Some of my guys are on the lower end of the wage scale,” said Mr. Perkins, who typically has 10 to 18 employees. “When I did the subsidy calculator, I realized many of them would actually be better off if we didn’t offer coverage. We took the amount of money we were paying for health insurance and dumped it into their paychecks instead. And this way, they get to make the choice, not me.”

No kidding. Employer-sponsored health insurance was a consequence of government regulation (WWII wage controls overlooked fringe benefits such as insurance) and has remained alive due to its tax advantage (employees get coverage with pre-tax dollars). Changing the regulations and financial incentives changes behavior - who knew?

A better question would be, who didn'tknow, other than Obama? And now that the Times has written about it, maybe Obama knows too.

The Times gets in the trenches with some live anecdotes:

Kelly Fristoe, an insurance broker in Wichita Falls, Tex., estimates that the employees at nearly half of his small-group clients would be better off if the companies dropped their coverage, gave some of the savings directly to the workers and let them shop for their own insurance. Four clients have already decided to do that for 2014.

Steve Hooper, president of the Health Economics Group, a Rochester, N.Y., company that manages corporate benefit plans, said many of the workers in his region, including most of his own employees, have incomes low enough to qualify for the federal subsidies available to those who earn up to four times the federal poverty level, about $46,000 annually.

“We have a lot of part-time people and single moms with kids,” Mr. Hooper said. “The New York exchange offers some tremendous options for them that are better than anything else out there.”

A self-described data fanatic, Mr. Hooper, 74, spent months studying the law’s nuances and exploring various situations for his 25-person business. He knew what he paid his employees, but he did not know their overall household incomes. So he created a staff survey and arranged meetings with his employees to discuss their individual situations.

It became clear that many, especially those with children, would be better off without the option of buying company-sponsored insurance. Employees who have access to an “affordable” employer plan can buy a plan instead through the exchanges if they choose, but they cannot collect any subsidy that they would otherwise be eligible for. And those with children face an extra pitfall: The law’s calculation of “affordable” does not take into account the cost of adding dependents to the employer’s plan.

In 2013, to insure 11 workers, Mr. Hooper’s company contributed $283 a month for each employee toward health care premiums, covering more than 80 percent of the cost for an individual. Employees paid an additional $55 a month, or more if they needed coverage for dependents. For 2014, Mr. Hooper is taking the $30,000 to $40,000 he will save by canceling the group’s plan and using it to fund flexible spending accounts for each employee.

So far, he said, only one person is facing higher premiums, and he plans to add extra money to her flexible spending account to fill the gap. And while his company’s old plan carried a $2,500 annual deductible, he said the typical deductibles on his employees’ new plans range from zero, for those who qualify for Medicaid, to $2,000.

Unsurprisingly, the numbers don't work if the employees are highly paid:

Paul Hamborg isn’t sure. Mr. Hamborg is trying to decide whether his company, Enrollment Research, a consulting firm based in San Antonio, should renew its group insurance in 2014. None of the company’s five employees would qualify for subsidies individually, and he is weighing the advantages of switching to individual coverage — more choice for his employees, less administrative overhead for him — against the increased tax bills for them. That issue, said Mr. Hamborg, who is 40, “is the one thing about the Affordable Care Act that’s a real disappointment, from my standpoint.”

Comments

The partner in hubby's firm that manages the health insurance side of the business has been busting his a** renewing small groups. Many of his small groups are family owned businesses that have an obligation to cover family members and long time employees. This time next year will be an entirely different situation. Hubby marvels at the young partners,they are not panicking (yet). They know exactly what is coming and are preparing for the worst.

That fake sign language guy in Africa apparently has a violent history and is mentally ill. Methinks that Secret Service should be doing some more investigation to keep our Preezzy safe; God forbid selfie gets attacked on camera by a black African--we'll never hear the end of it.

Making ever larger pools is the objective. Now, a single payor system is even more economical. Groups of less than 100 don't have the advantage of spreading the cost, so it's a good decision to let employees into the larger class.

I say here and now EVERYONE here at JOM has been wrong about Obama and ObamaCare, me, DuDa and the other trolls, everyone. Obama's objective isn't to destroy America, that's too ambitious, no his personal goal is to destroy the modern Dem party. How else can you explain ObummerCare? It will destroy Democrats as a big tent party for decades. Obviously, Obama wants to replace the dem Party with the Obama Party, but make no mistake he's out to destroy the Dems. Discuss.

Sara Kliff tweets: Breaking: As some struggle to buy coverage, the Obama admin. is extending state-high risk pools through January.

That's all - just a tweet so far. It is clearly a WH reaction to her story about hundreds of thousands of very sick people in High Risk Pools losing their plans and being unable to get new ones that actually cover their conditions (drugs, hospitals, doctors).

I await the explanation of how this extension is within his authority.

I had actually misunderstood Dana's comment because I sipped over yours NK and thought he was still talking about healthcare/insurance.

Rereading my comment in light of yours I still see it applies. As always they want a central unlimited power which keeps the "peace" through thousands of little localized soviets controlling the individuals.

And they have the gall to come here and talk about how big and scary the NSA is.
Their only objection to the NSA is they prefer neighbor spying on neighbor rather than strangers watching us.

BOzo couldn't plan, let alone organize, a walk around the block. Howard Dean's Unholy Grail for the Progressive Democrat Party was single payer (that's why Dana Gilbert Ward, Feather Passer Emeritus at Pitzer College for the Extremely Limited stinks up comments here). The original plan was to bump the Medicaid parasite count from 60 million to 85 million by modifying eligibility. The Dread Pirate Roberts sank that one and now it's just Deep Blue Hells increasing the parasite count - without shifting the electoral balance a millimeter.

The final result may be the destruction of the Progressive Democrat Party but it will be due to the complete incompetence and utter stupidity of progressives in general rather than the incompetent puppet in the White House.

Iggy:
Happy Birthday! Have a wonderful day. We at JOM are thinking about you and I always enjoy your posts.
BOE: Don't you dare leave. You are always entertaining and insightful. Stick with us ,please?
68000 more people need unemployment help.
4 week average up 6000.
368,000 overall number.
What happened in a week to generate a mass exodus from jobs?
Oh the O administration fudged the numbers last week-I get it now.
My prediction: Next month-Rate goes up to 7.1 or 7.3. wait until the temporary help for Christmas is cashiered.
Taper may not happen in December now. Who else feels manipulated by these numbers and the Bammycare ones?

it probably isn't and they probably won't release much more justification. his big speech the other day was blame shifting to state insurance commissioners and insurance companies. talk about tweeting it in.

NK-

possibly. it would also explain his "Organizing for America" and "Enroll America"...but to what end. put his wife in the drivers seat for 8 years or make a run at the 22nd.

RickB-- as usual there's nothing in your comment to dispute. The only clarification I would make is that destroying the modern Dem (Clintonista/Hollywood/Wall Street/Rich White Lib) Party is Obama's personal goal. Will he succeed?, he'll probably fail for the reasons you state, indeed he'll probably "Capt. Tupolev" himself. But IMO his goal is to be the USA version of the Castro Bros. and Chavez/Maduro. In the ongoing civil (not so) war between the Clintonistas and the Obama Party, I still favor the Obamamaniacs-- the Clintonistas are old and rich-- I never favor that demographic in a street fight.

rich@gmu- I'm quite serious, he wants to be the Castro Bros and Chavez/Maduro-- even if some fall guy beards are needed for a while.I bet he thinks Mandela was chump for giving up power after 2 terms as President.

Yesterday, they reported "There are also approximately 300,000 Americans receiving coverage through state-run high-risk plans"

Today, they report "The program covered just over 104,000 Americans as of last summer".

It looks like only the Fed pool is extended, but who can say? It's sloppy.

They make no mention of what gives the WH the authority to do this. I do think the funding probably exists, though, given they closed the program to new enrollees way back in February because they were already worried about being able to cover those who had signed up. I imagine there's a month's worth of leftover cash they can apply.

Thanks for all the birthday wishes on the several threads everyone.
Only one sour note;
Hit, your chainsaw cake is a Husqvarna which no right thinking person owns or eats. If you've got a Stihl cake handy then by all means I will take both an undercut and a back cut of it. (A little faller lingo there) :)

hum, guess it would serve his purpose of a. not having to work and b. getting to hear the sound of his own voice and c. of being able to criticize without having to take any responsibility. Too bad we couldn't have an Obama.fail tour complete with buses and exhibits-like what the Obama campaign did to Bush.

NK-

When JM Hanes was her we were discussing that point, but were looking at how he was rearranging the dem party with his own people and shaping the federal bureaucracy into his own "government within a government": his active organizations (how is "Enroll America" legal or ethical by any standard), government unions, federal bureaucrats, and other 501s.

He said he wanted to build a civilian defense corp just as well funded as the military...looks like he was busy building it.

Rich-- that is all part of the Obama Party, but IMO there is no room for the old Dem Party, it is a competitor for power, not a teammate-- unless the Clintonistas surrender and hand him the Dem Party as is.

BTW-- deBlasio did that here in NYC-- the "Old Dem" party kind of evaporated leaving the socialists the teachers Union (same thing) and OWS/hippies and muslims, nobody else cared. he won with 17+% of the registered voters, Lhota got about 7% of registered voters. Nobody cared-- they'll get an education now.

RB- I attended a small business and francise convention in Las Vegas about a 1 and half ago, at the time many were gearing up for the employer mandate.

One of the keynote speakers gave a presentation about Obamacare and what he suggested small businesses do as well as their options.

He said that on average small businesses that provided care spent about $4500 on healthcare, not counting the administrative fees. Even if they had more than 50 and were required to pay the penalty (tax) it would still net a savings of $2000. You could bump their salaries by half that amount and still come out with a savings of $50,000 per year based on those that had 50 employees a savings of 22%.

He also was explaining that based on what he was being told the cost to insure employees was going up from the average of $4500 to about $6500 due to the new requirements of the law which meant for a business with 50 employees an added $100000 a year.

Point being that this should come to the surprised of no one who did not have their head in the sand.

BTW, if anyone is still looking for a Christmas present these Nomex, lined gloves are the best I've ever owned.
Used to have them in the AF and it never dawned on me to look on ebay until a few weeks ago.
They're not made for heavy duty abuse but for everything else they're great and the non lined ones are great year round for light duty stuff.
Extremely nimble and, being Nomex, if you ever catch on fire they might only find your charred remains but your hands will still look great.

iggy, the house I bought when I was first married had a pair of asbestos gloves in the basement, left by the previous owner. I wanted to keep them, but my wife gave them to the asbestos abatement guys who stripped all the insulation off the steam pipes. think how handy that would have been.

"I continue to believe that, as a matter of policy, the defense increase—which at least begins to undo the very considerable damage from a wildly and disproportionately anti-defense sequester—swamps in importance everything else in the deal. Everything else is basically a wash. The defense increase is a real plus.

"I continue to believe that, as a matter of politics, the deal is very good for Republicans. If passed, it takes another government shutdown off the table, and allows Republicans to focus on fighting President Obama rather than each other. In particular, it allows Republicans to focus on Obamacare."

OMG! These poor people getting dumped into Medicaid----
it is NOTHING like having health insurance, picking your doctor, picking your hospital.
They will be lucky to find a nurse practioner to see them in a month.

It's what they wanted---they want doctors to be government employees, and a two tiered system.

I just ordered my husband a pair of the lined flight gloves. Winter in New Hampshire with snow on the ground is the prime time for burning brush, tree trimmings, and junk wood accumulated over the Fall. My husband does a lot of that due to our heavily wooded property, and these gloves look like they will be very useful, both for warmth and the fire retardant properties. Thanks!

In the vote where the JEF packed the DC Circuit court with a hand chosen radical, those two rock ribbed Repukes, Susan Collins and Lisa Murscruntski, voted with the donks. What would the party of stoopid be without those two?

You can waive a jury and get a judgment from a judge. There are some good reasons to do that. One, when the case appears to be a slam dunk under the law, another when the law is too complicated for the jury to understand - stuff like that. I have always said a trial is like going to Vegas and putting all your money on #7. There is simply no way to know what will happen, regardless of the facts. Sometimes a judge seems to be less of a risk than a jury.

In the case Pagar cited, the lawyer should have known about the judge's prejudices but who knows?